Premature Deindustrialization in India and Re thinking the Role of Government


The paper is on premature deindustrialization that India is experiencing and the role that government must play. Significant economic reforms were initiated in India in the early 1990s. These have brought about significant changes in the economy, but these have failed to stimulate the manufacturing sector. In fact the situation is worse than that in the pre-reforms period. After discussing the nature of the manufacturing crisis, the paper focusses on three important aspects – import liberalization, foreign direct investment and technological development.  The paper analyses the impact of reforms and what has been the official response. The paper stresses the vital importance of industrial policy in India today. It argues for an industrial strategy coordinated and led by the government. The objective of such an intervention is not to replace the private sector but to supplement the efforts of the private sector and enable it to play a more proactive role.

The author

Sudip Chaudhuri is a Professor of Economics at the Indian Institute of Management Calcutta. His research interests include industrial policy, role of state in developing countries and intellectual property rights. He has published widely including a book on WTO and India’s Pharmaceuticals Industry: Patent Protection, TRIPS and Developing Countries, Oxford, University Press. He has done commissioned studies for various organizations including the World Health Organization, Geneva, United Nation Development Programme, New York, United Nations Industrial Development  Organization, Vienna, Reserve Bank of India and the Government of India.

The text

Parts of the paper were presented in seminars (BRICs) at the Fondation Maison des sciences de l’homme (FMSH), Paris, where Sudip Chaudhuri was invited as an Associate Research Director (DEA) in October 2014, and Loreto College, Kolkata. This working paper will be presented at the BRIC Seminar to be held in April 2015 at the CESP, Jawaharlal Nehru University, Delhi. The author benefitted from comments and suggestions from Guilhem Fabre. This is an outcome of the research project, “State, globalization and industrial development in India: the political economy of regulation and deregulation”, coordinated by the Norwegian Institute of International Affairs.

Published at 21 April 2015